Logic suggests that a lack of affordable housing in a region will dissuade people from living there, and employment levels will suffer as a result. However, until recently, no one had readily tested this theory and simply relied on this logic to substantiate this assumption. Ritashree Chakrabati and Junfu Zhang of the New England Public Policy Center published a report looking empirically at this theory in the United States. In doing so, they have found a substantial correlation between a lack of affordable housing and suppressed job growth.
While Chakrabati and Zhang analyzed data from many US metropolitan areas and counties, they first used California as a state case study to cut down on the number of unaccounted-for heterogeneities created by state policies. California epitomizes the problem of a dearth of affordable housing suppressing an economy. The increased cost of doing business has driven companies out of expensive California, exacerbating the unemployment problem, while the recipients of this flight (mainly in the Midwest and Pacific Northwest) are finding some growth in this recession. These days, people aren’t prioritizing culture and lifestyle; they simply don’t have the budget for it. In order to grow, states must assure residents and businesses that they can sustain themselves during this difficult time.
The findings of this study should also alert countries such as Australia, now in the midst of a major land and housing crisis, about creating more affordable conditions around their urban core cities to maintain economic growth, much less stimulate it. Just as businesses are reluctant to stay in California, business will be reluctant to find a home in these expensive core cities. Almost every country depends on global ties to support itself, and it will be those that can strike a balance between affordable housing and standard of living that thrive.